ATM withdrawal fees to increase from May 1 as RBI approves fee hike

New Delhi: Cash withdrawals from ATMs will become more expensive from May 1, as the Reserve Bank of India (RBI) has approved an increase in ATM interchange fees. Customers exceeding their free transaction limit will have to pay higher charges, adding to their banking expenses.

An ATM interchange fee is a charge one bank pays another for providing ATM services. This fee, typically passed on to customers, is set to rise nationwide following requests from white-label ATM operators, who cited increasing operational costs.

As part of the revision, customers will have to pay an additional Rs 2 for every financial transaction beyond the free limit, raising the total charge to Rs 19 per transaction from the previous Rs 17. Non-financial transactions, such as balance inquiries, will now cost Rs 7, an increase of Rs 1.

The hike is expected to impact customers of smaller banks more significantly, as these institutions depend on larger banks for ATM infrastructure and services.

The decision comes amid a shift in banking preferences, with digital transactions rapidly overtaking cash withdrawals. While ATMs were once a cornerstone of banking convenience, the rise of digital wallets and UPI payments has reduced reliance on cash.

Government data highlights this transformation, revealing that digital payments in India surged from Rs 952 lakh crore in FY14 to Rs 3,658 lakh crore in FY23, underscoring the country's move toward a cashless economy.

With the increased ATM charges, customers still dependent on cash transactions may feel the strain, potentially accelerating the transition to digital alternatives.

With IANS inputs